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Daily Reports @ WJR

WJR September 2006 Reports

September 29, 2006

It should be a very interesting day. It’s the last day of the week, month and quarter. And we’re on track for the best September performance in 8 years.

We’re getting a lot of economic data this morning. And the day will be particularly interesting if you own shares of Research in Motion. The maker of those little thumb-buster Blackberry machines posted much better than expected profit for the second quarter and raised their profit estimate for the third quarter. RIMM stock is looking to open about 17 percent higher at 9:30.

At 8:30 Personal income and consumption in August is expected to come in at 3 tenths and 2 tenths of a percent respectively. At 9:45, the University of Michigan’s Consumer Sentiment Index is expected to increase to a level of 85. And at 10 o’clock, the Chicago PMI, which measures manufacturing activity is expected to reflect slowing expansion in manufacturing. The estimated PMI is 55.7. That number would be in line with the generally rosy view that the economy continues to expand, but perhaps at a rate that will not spike inflation.

Overseas markets are all in the green. Our stock futures are in better shape than they were in a couple of hours ago. And although they look promising at first blush, but a closer look is pointing toward a flat open for stocks. The S&P, Dow and NASDAQ futures are all just a point or two above fair value.

September 28, 2006

With two days to go in the third quarter, and a noticeable absence of major earnings warnings, the Dow Jones Industrial Average is now 33 points from closing at an all-time high, with the futures pointing slightly higher at this hour.

In ten minutes, we’ll get the final word on how the economy did in the second quarter of the year. It’s not expected that the estimated growth number of 2.9 percent will much change.

A number of Hewlett-Packard executives and former executives will be testifying before the House Energy and Commerce Committee today regarding their corporate espionage scandal. One of them that you can put in the “former executive” column is General Counsel Ann Baskins, who within the past hour resigned, effective immediately. We might expect to hear the term “fifth amendment” quite a bit.

American Greetings says that they’ll still make somewhere between 80 cents and a dollar per share this year. However, the quarter gone by fell far short of expectations, as American Greetings lost 23 cents per share versus an expected 16 cent loss.

Overseas markets are almost uniformly, although modestly higher. We should start the morning on the right foot as well. Adjusted for fair value, the S&P futures are up a little more than 2 points, Dow futures are up 14, and the NASDAQ futures are now about 4 points above fair value.

September 27, 2006

The Dow Jones Industrial Average will start the morning just 53 points from an all-time closing high as the economic data continues to suggest an economy that’s doing well enough to expand, but not well enough to ignite inflation.

On the doing well enough side, at 8:30 we’re expecting to hear the August Durable Goods Report come in at a half-percent increase, after July’s 2 ½ percent drop. On the doing-not-so-well side, applications for mortgages fell almost 5 percent last week, according to the Mortgage Bankers Association, in spite of falling interest rates. At 10 o’clock, we’ll find out how much new home sales declined in August. Expect just a slight drop to 1.04 million units from July’s 1.07 million.

According to the Wall Street Journal, General Motors is asking Nissan and Renault to not only buy into GM stock, but to also throw in a multibillion dollar “bonus” payment in recognition of the value GM’s global reach. Think of it as a little “cash on the hood.” A dowry, if you will. Well, there’s no harm in asking, right?

Overseas stock markets are up across the board. It’s steady as she goes to slightly higher for stock futures this morning. Adjusted for fair value, the S&P futures are up 1 ½ , Dow futures are up 17, but the NASDAQ futures are now about a point below fair value.

September 26, 2006

Stock prices tacked on some nice gains yesterday, especially the NASDAQ, which rose over 30 points. European markets have followed on this morning, rising about three-quarters of one percent.

Today looks like a wait-and-see kind of day, and what we’re waiting on is the 10 o’clock release of Consumer Confidence data from the Conference Board. Expect that falling gasoline prices have perked up consumers’ mood in September to a reading of 103, from last months’ 99.6.

The warnings of the morning are in from homebuilder Lennar, home improvement retailer Lowe’s and PMC-Sierra. Lennar, the nation’s third-largest homebuilder, says that it sees no end to the decline in its homebuilding business. They say that they’ll make only a buck to a buck thirty in the fourth quarter, versus the expected dollar sixty. With no pun intended, Lowe’s guided to the low end of expectations for the rest of the year, just as Home Depot did last month.

There’s not much direction in the stock futures at this point. Adjusted for fair value, the S&P futures are just about flat, Dow futures are down 10, and the NASDAQ futures are now about 2 points below fair value.

September 25, 2006

It’s been a while since the price of a barrel of light sweet crude started the day beginning with a “5.” But, this morning, oil is trading down 67 cents at $59.88 per barrel. That has stock futures pointing higher after a couple of days of profit taking late last week.

It’s the beginning of the last week of the 3rd quarter, so look out for earnings warnings that may be lurking. The third quarter is famous for unmet expectations, so expect some unpleasant surprises as the week rolls on.

If you’ve had an unsold house on the market for a while now, you have a lot of company. The August report on sales of existing homes comes at 10 o’clock this morning. Expect an annualized rate of 6.2 million versus July’s 6.33, as the housing market continues to move down the stairs into the basement.

The Dallas Federal Reserve President is giving a speech today and we’ll get an earnings report from Walgreen, but it should be a relatively light news day.

Asian markets were mixed, but Europe is trading higher. Our stock market should head higher at 9:30. At this point, adjusted for fair value, the S&P futures are up almost 5 points, Dow futures are up 36, and the NASDAQ futures are now 8 points above fair value.

September 20, 2006

We’re going to see some life in the Nasdaq this morning. Oracle shares are up over 10% in European trade after Oracle last night reported about a 30 percent rise in both revenue and earnings.

There’s more good news on oil prices this morning. Crude is under 61 bucks per barrel as speculators are speculating about trouble brewing with the speculators. What?

Hedge funds have been all the rage of cocktail party talk for a couple of years now. These somewhat unregulated investments used to be available only to the rich, although, lately some have been repackaged so that ordinary folks can have the opportunity to lose money just as rapidly as if they had millions. Evidently, giant hedge fund Amaranth recently swung from a 22 percent year to date gain to a 35% or higher loss due to a bad bet on natural gas. That announcement came Monday, just late enough so that anyone who wanted to redeem their interest would have to wait until year-end. Bottom line: a lot of Amaranth investors want out and a lot of others are worried that hedge fund energy speculation may dry up and push the price of energy down a lot more.

Don’t even think about the Fed raising rates at 2:15 this afternoon – they’ll stand pat after yesterday’s PPI and housing numbers.

Stocks should head higher at 9:30. At this point, adjusted for fair value, the S&P futures are up 5 ½ points, Dow futures are up 35, and the NASDAQ futures are 13 points above fair value.

September 19, 2006

Natural gas prices are up ten cents this morning. That puts gas at just over 5 bucks. That’s down from around 13 bucks a year ago. That’s good news for your winter heating bill, but bad news for the big hedge fund Amaranth.

Hedge funds have traditionally been largely unregulated investment playgrounds for big money folks. Lately, of course, hedge funds have been repackaged to make them more available to the average investor, thus allowing the average guy to lose money just as quickly as if he had millions. Amaranth, one of those hedge funds, went from a 22 percent profit to a 35 percent loss last week because of a bad bet on natural gas prices. Oh well, easy come go. Careful, out there everybody!

In ten minutes we’ll get the last big data points before the Federal Reserve’s interest rate decision tomorrow. The overall August Producer Price Index is expected to have risen 3 tenths of a percent, with the core rate rising two-tenths of a percent. Also at 8:30, expect to see August housing starts pull back by about 2½ percent, to a 1¾ million annual rate.

Absent some good news with those numbers, we should head lower when the market opens. At this point, adjusted for fair value, the S&P futures are down a little less than 3 points, Dow futures are down 21, but the NASDAQ are about 3 points below fair value.

September 18, 2006

There’s not much on the docket for today, but it should be an interesting week.

On Wednesday, the Federal Reserve Open Market committee meets to decide if interest rates should stay put for the next five weeks. Odds are that they will stand pat. However, tomorrow they will get August’s Producer Price number. Any big uptick may get them to change their collective mind.

There’s a little flurry of earnings reports due this week from companies with odd fiscal years. However, we may hear some early warnings about 3rd quarter earnings from calendar year end companies. There are only two weeks to go in the calendar quarter. Analysts are traditionally too optimistic about 3rd and 4th quarter performance, so watch out for surprises.

GM and Ford are both being bid higher in the pre-market on a story in Automotive News that they may be considering an alliance or even a merger.

The DAX in Germany is flat, but the rest of Europe is slightly higher. At this point, adjusted for fair value, the S&P futures are up a point, Dow futures are up 12, but the NASDAQ are just about a half point above fair value.

September 15, 2006

The formal announcement was released at 7 this morning. If you’re a Ford white collar worker at the office today, take a look at the person on your left and take a look at the person on your right. One of the three of you may be doing something else soon. Pair that with 25 to 30 thousand union workers who will be going away, and Ford hopes to reduce operating costs by 5 billion dollars by the end of 2008, while at the same time replacing dramatically upgrading 70 percent of its product mix. Sounds like those who do retain their jobs are going to be working pretty hard. Ford has also suspended its stock dividend.

The economic data spigot opens wide this morning. At 8:30, it’s inflation watch as the August Consumer Price Index is expected to come in at 2 tenths of one percent, down from 4 tenths last month. Anything north of that 2 tenths number could give stock prices the willies.

We’ll also get industrial production and capacity utilization data at 9:15, and then at 9:45 the University of Michigan’s preliminary estimate of September Consumer Sentiment is expected to rise to 84 versus last month’s 82, probably due to dropping gasoline prices.

Overseas markets are pretty close to the flat line, and our futures are pretty non-committal in front of the CPI report. Adjusted for fair value, the S&P futures are down a point, Dow futures are down 5, but the NASDAQ are just about a point above fair value.

September 14, 2006

It’s been a quiet week for economic data, but that will start changing today. August retail sales figures is today’s big announcement and that will come at 8:30. It’s expected that slumping car sales dragged down overall retail sales by about 3 tenths of one percent.

General Electric was hit with a broker downgrade this morning, but it may not fare that badly at 9:30, as they announced the sale of their Advanced Material division to an investment firm that should net GE about 2 billion dollars. There’s another deal in the metals sector as well. Iamgold is acquiring Cambior in a 3 billion dollar deal. In the oil sector, Anadarko is selling Anadarko Canada for 4 billion bucks.

Bear Stearns is the latest investment bank to check in with better than expected earnings. They reported $3.02 per share versus an expected $2.87.

Overseas markets are generally higher. But absent a big surprise in the retail sales number, we should start lower at the open. Adjusted for fair value, the S&P futures are down almost 2 points, Dow futures are down 23, and the NASDAQ are now almost 2 ½ points below fair value.

September 13, 2006

The big stock story of the morning is once again out of Detroit this morning, although we’d really prefer to not to get attention in this manner. All eyes will be on Ford Motor Board meeting today. The Wall Street Journal says that nearly one in every three white collar positions at Ford may be going bye-bye through a combination of early retirement buyouts and possibly outright layoffs. Even if you don’t work at Ford or even in the auto industry, don’t think that this is not bad news for you, for instance, if you own real estate around here.

Speaking of which, according to the Mortgage Bankers Association, nationwide mortgage applications are down almost 23 percent from last year, and the interest rate differential between a 30 year fixed loan and a one-year adjustable is down to just over 36 basis points, or just a third of a percent.

Lehman Brothers is the big earnings report of the day.

The seven-day-long drop in the price of oil has paused this morning. Light sweet crude is up 17 cents, but it was up a half dollar or so earlier this morning. The weekly oil inventory data, which will move that price, will be released at 10:30.

Asian markets rose overnight, but Europe is narrowly mixed at this point. It looks like we’ll get off to a mixed start at 9:30. Adjusted for fair value, the S&P futures are down just a half-point, Dow futures are down 9, but the NASDAQ are now almost a point above fair value.

September 11, 2006

Obviously it’s a day that will be filled with September 11th memorials for those we lost five years ago.

As far as the stock market is concerned, one thing we gained after 9/11 is a respect for price volatility, which, of course, over the short term equals risk.

In 2001, when the U.S. stock market reopened the week after September 11th, it was not unusual to have 300 and 400 points swings in the morning futures on the Dow. While those wild swings are gone five years later, most investors are now much more sensitive to the level of risk in their portfolios.

But there will be plenty of other speeches, meetings and announcements to hold traders attention, as well as the 9/11 remembrances.

It’s lunchtime at the OPEC meeting in Vienna. OPEC is expected to hold to current production targets. In front of that decision, crude oil prices are down once again this morning, nearing the 65 dollar level.

A couple of Federal Reserve Bank Presidents will be giving speeches today and Texas Instruments will give us a mid-quarter update.

Ahead of all that, we’ll be giving back a lot of Friday’s rally right at the open. At this point, adjusted for fair value, the S&P futures are down almost 6 points, Dow futures are down 44, and the NASDAQ are about 14 points below fair value.

September 8, 2006

As they say, when it rains, it pours. And it’s pouring in the homebuilding business right now. For the third time in three days, a big homebuilder is warning that earnings are going to fall short of expectations. This time it’s Lennar, which is now expecting to make about a buck thirty per share this quarter, versus the $1.81 that analysts expected. While we’re on the subject, St. Joe Company says that they will take a 9 million dollar charge this quarter as they shut down and pull out of the Florida home building market altogether.

National Semiconductor may be under some pressure tis morning. Last night they reported a 40% increase in profit, but they lowered guidance for the current quarter due to soft demand for cell phone chips.

General Mills and Campbell suffered broker downgrades this morning.

It should be another fairly quiet news day as we gear up for next week’s OPEC meeting and the start of earnings warning season.

Overseas markets stabilized overnight and rose slightly after a couple of days of losses, and it looks like we’ll get off to a decent start at 9:30. Adjusted for fair value, the S&P futures are up about 3 points, Dow futures are up 26, and the NASDAQ are about 2 ½ points above fair value.

September 7, 2006

Stocks prices took one on the chin yesterday as the fear of inflation once again reared its ugly little head. The announcement that labor costs are rising 5 percent per year raised a big black cloud over the Fed-is-done picnic that we’ve enjoyed for the past month.

Perhaps a little more insight into Fed policy will come in a speech today from San Francisco Federal Reserve Bank President Janet Yellen. Yellen is typically pretty dovish when it comes to interest rate hikes, so perhaps she will calm some nerves with her comments.

Oil inventory data and weekly jobless claims are the main data points due out today. At 10 o’clock, we’ll get data on July Wholesale inventories, but truth be told, there’s just not a lot of market moving data on the docket.

Homebuilders will be under more pressure this morning after a warning from Beazer Homes.

Overseas, things are pretty much a mess. Hong Kong was off one percent overnight. Japan was off 1.7%, with most of the damage in the tech sector, and most European markets are about one percent lower.

It would be nice to avoid a rerun of yesterday’s market, but at this point, futures on the major indexes are just about as ugly as they were 24 hours ago. Adjusted for fair value, the S&P futures are down about 3 ½ points, Dow futures are down 27, and the NASDAQ are about 4 points below fair value.

September 6, 2006

As a CEO, you love to make announcements that boost the company stock by 4 or 5 percent. Sometimes it costs you your job. Bill Ford’s announcement yesterday that he will step aside as CEO of Ford in favor of Boeing executive Alan Mulally has Ford stock trading about 4 percent higher in Europe this morning. No fewer than five investment firms have either upgraded Ford stock or made positive comments about it. Ford shares are likely to open somewhere around the $8.80 level this morning.

In just about ten minutes the revised 2nd quarter productivity numbers are expected to reflect about a 1 ½ percent productivity increase. Ben Bernanke and his buddies pay a lot of attention to this number. Obviously, the higher that number the better for the inflation outlook as well as for stock and bond prices.

Light sweet crude oil is down another 73 cents this morning, but in spite of that, stock prices around the world are uniformly in the red this morning. Most markets are off between a half and one percent.

Our futures have been declining all morning as well. At this point, adjusted for fair value, the S&P futures are down about 4 ½ points, Dow futures are down 32, and the NASDAQ are about 8 points below fair value.

September 5, 2006

It’s back to work for stock traders as we enter the first full week of September. And September has, over the years earned the reputation as a stinko month for stocks. Last September ended with a small gain, but the prior six Septembers were times we could have done without.

The winner of the morning may be Chevron and other oil companies who have oil rights in the Gulf of Mexico. A Chevron-led partnership in the Gulf has hit an oil field at the bottom of a more than 5 mile deep drill that may prove to be a major source of oil for the U.S. market. That oil won’t be coming to market for years. However, light sweet crude futures are down to $68.43 per barrel this morning.

Veritas, the Houston-based geophysics company is being acquired by a French firm for over 3 billion dollars. That’s about a 35% premium.

Stock futures turned from negative to positive about an hour ago, although we should only get a modest move at 9:30. At this point, adjusted for fair value, the S&P futures are up 1 ½ , Dow futures are up 8, and the NASDAQ are a point and a half above fair value.

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